Changing risk management for the changing global environment

close up of a man in suit and some colleagues viewing papers depicting bar graphs

People are adapting to the increasingly complex environment around them. We’re living longer than ever, in an environment of constant change. Technology is affecting how we work and communicate, making anticipating the future more complicated than ever. The strategic chief risk officer (CRO )needs to be at the forefront of understanding this changing environment to assess risks in an informed way and be brave in supporting new opportunities.

This article outlines six of the key global trends that are impacting the work of risk management teams.

1. People

Diseases that were once killers have been eradicated and many of those remaining can be treated or prevented. People are more educated on health issues, and technology is pushing the boundaries of medicine.

On the other hand, people are living longer, and with this comes the increase in other diseases related to old age. There are increasing long-term care needs and a social and fiscal structure that many countries are often not prepared for. This poses a challenge for the life insurance industry, which is finding it difficult to develop financially viable products for an older, but less healthy population.

Changes in wealth between generations is also leading to a change in customer base for traditional insurance products. These changing needs bring with them the need to develop products that satisfy them while understanding their related risks.

2. Places

There are more environmental factors to consider, such as rising sea temperatures, heatwaves, hurricanes, wildfires and floods. These events have wider consequences than just on the people they impact. They can also impact the wider economy by deteriorating the value of assets. Added to this is the indirect effect that potential regulatory action to protect the environment, which could lead to falling stock prices of companies in some industries such as plastics or petroleum, to name just two.

Understanding both the effects of these high impact, low frequency events and potential society and regulatory responses that could also have indirect effects on the company is a key role of the strategic CRO. Risk teams need to have the wider understanding and ability to horizon scan, as well as the tools to assess and quantify (stress and scenario test) the impact of such events and related management actions. As climate events become higher impact and more frequent, the cost of not having these core skills increases.

3. Technology

It is expected that our lives will be digitalized, which presents opportunities for insurers that can better understand customers and meet their needs through the analysis of data.

This brings additional privacy, cyber and ethical risks. The quality of any data used must be considered for inaccuracies or inappropriateness. Risk teams must consider moral, ethical and legal implications of data usage, as well as the changing way that risks are modeled from the increasing use of data and advanced analytics.

4. Behavior and expectations

There are also cultural shifts in people’s behavior. Customers are expecting more from the products that they purchase, and due to increasing levels of consumer connectivity, are more inclined to vent their frustrations to a wider platform if they experience a dissatisfactory service, which means that reputations and trust can be damaged easily.

However, technology can better inform risk teams of early warning indicators, and a remediation plan can be ready to be used if necessary. This may involve tracking indicators to suggest the public perception of the company, monitoring social media channels and working with media companies to analyze what is published.

The role of insurance companies will move from one of life support to living support as they are able to track health indicators and guide life choices. With this comes a potential increase in conduct and reputational risks. The strategic CRO needs to be fully engaged with customer needs and the increasing level of data used and information provided to deliver this service.

5. Complexity

The world is more connected and complex than ever, and this poses a challenge for risk teams. When understanding the impact and interaction of these exposures, risk teams need the adequate modeling capabilities and stress and scenario testing considerations to understand the full impact of a risk event.

6. Changing risk teams

In this series we have highlighted the need for the CRO to be a core part of decision making. The changing environment brings with it a need for the CRO to have new skills and knowledge in their teams to fully understand the changing risks, and consider changes to other fundamental elements of the risk framework. These changes will range from the way that risks are measured and monitored, to changing roles and responsibilities that underpin the management of risks by the business.


Having a framework and tools that are ready to respond to change with agility and resilience will ensure that any risk team is ready for the challenges it may face. This may mean having policies that can be easily amended to include extra risks, budget in reserve to seek expertise on a niche subject that emerges or risk mitigation techniques set up and be implemented if risks exceed a desired threshold. The key to a successful risk team is not to prepare for every eventuality, but to be prepared for any eventuality.


Kristy Leece head shotKirsty Leece is a Director in Willis Towers Watson’s Insurance Consulting and Technology segment. She specializes in risk advice, having worked on a wide variety of ERM activities, including developing risk frameworks, risk appetite statements, risk governance and policies and risk management information; supporting embedding and board training; completing second-line reviews and developing regulatory risk reporting (e.g. ORSA/ SFCR).


Jennifer Smith head shotJennifer Smith is a Senior Consultant in the life insurance team of Willis Towers Watson’s Insurance Consulting and Technology (ICT) practice and forms part of the risk management proposition team.

Categories: Global Risks, Insurance and Risk Management, Risk Culture | Tags: , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *